OKPay suspends payment processing to all Bitcoin exchanges

With mounting pressure on online money exchanges from US regulators, payments processor OKPay has announced that it is suspending processing for all Bitcoin exchanges, including industry leader Mt. Gox.

OKPay itself has had precious little to say publicly about the decision, other than issuing a one-line statement on its website to the effect that it is in the process of suspending its Bitcoin activities.

The headline on the notice says the suspension is temporary, but to hear Mt. Gox tell it, it may be some time before OKPay resumes business with the Bitcoin community.

"OKPay is offering a solution, but in the meantime we want to make sure that Mt. Gox customers and the Bitcoin community are well-informed about this development," reads a statement posted to Mt. Gox's website on Tuesday.

The company says that while it's not exactly sure when OKPay processing will be shut off completely, Mt. Gox will "soon" stop accepting payments via OKPay, probably within the next couple of weeks.

Withdrawals from Mt. Gox to OKPay accounts will not be cut off, but the amount that can be withdrawn will be limited to the amount that the customer had deposited via OKPay; any remaining balance will have to be withdrawn using other means.

Neither Mt. Gox nor OKPay have explained the reasons behind OKPay's decision, but this isn't the first time Mt. Gox has run into problems with one of its payment processors.

Earlier this month, the US Department of Homeland Security seized Mt. Gox's account with mobile payment processor Dwolla, on allegations that the account was in violation of US Code 18 USC § 1960 by operating an "unlicensed money transmitting business."

Just where the Bitcoin market falls under US law is unclear, because the legality of Bitcoin transactions has yet to be tried in court and law enforcement has refused to comment on ongoing investigations, such as the Dwolla case.

The US Commodity Futures Trading Commission has said it is investigating whether Bitcoin transactions should rightly be governed by its rules, but no determination has been announced as yet.

Still, there's increasing evidence that regulators' interest in the online payment industry is growing. On Tuesday, federal prosecutors shut down the alternative online payment network Liberty Reserve and arrested three of its founders, describing the company as a $6bn global money-laundering operation.

While Liberty Reserve didn't have any direct connection to Bitcoin payment processing, many in the Bitcoin community worry that the incident is a signal that the government is increasing its scrutiny of alternative payment schemes and that Bitcoin could be its next target.

For its part, Mt. Gox aimed to put a positive spin on the OKPay news, suggesting that the whole situation will sort itself out eventually.

"Mt. Gox wishes the best to OKPay, and we look forward to working together more closely in the future," the company's statement explained. "The Bitcoin economy is going through many changes recently, and we are positive that they will ultimately work themselves out in the best interests of the community and the World." ®